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GuruFocus has detected 5 Warning Signs with Cintas Corp \$CTAS.
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Cintas Corp (NAS:CTAS)
Accounts Receivable
\$606 Mil (As of Feb. 2017)

Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Cintas Corp's accounts receivables for the quarter that ended in Feb. 2017 was \$606 Mil.

Accounts receivable can be measured by Days Sales Outstanding. Cintas Corp's Days Sales Outstanding for the quarter that ended in Feb. 2017 was 43.18.

In Ben Grahams calculation of liquidation value, accounts receivable are only considered to be worth 75% of book value. Cintas Corp's Liquidation Value for the quarter that ended in Feb. 2017 was \$-1,355 Mil.

Definition

Accounts Receivable is money owed to a business by customers and shown on its Balance Sheet as an asset.

Explanation

1. Accounts Receivable are created when a customer has received a product but has not yet paid for that product. Days sales outstanding measures of the average number of days that a company takes to collect revenue after a sale has been made. It is a financial ratio that illustrates how well a company's accounts receivables are being managed.

Cintas Corp's Days Sales Outstanding for the quarter that ended in Feb. 2017 is calculated as:

 Days Sales Outstanding = Account Receivable / Revenue * Days in Period = 606.209 / 1281.135 * 91 = 43.18

2. In Ben Grahams calculation of liquidation value, Cintas Corp's accounts receivable are only considered to be worth 75% of book value:

Cintas Corp's liquidation value for the quarter that ended in Feb. 2017 is calculated as:

 Liquidation value = Cash and Cash Equivalents - Total Liabilities + (0.75 * Account Receivable) + (0.5 * Inventory) = 147.244 - 2092.906 + 0.75 * 606.209 + 0.5 * 272.181 = -1,355

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Be Aware

Net receivables tells us a great deal about the different competitors in the same industry. In competitive industries, some attempt to gain advantage by offering better credit terms, causing increase in sales and receivables.

If company consistently shows lower % Net receivables to gross sales than competitors, then it usually has some kind of competitive advantage which requires further digging.

Average Days Sales Outstanding is a good indicator for measuring a companys sales channel and customers. A company may book great revenue and earnings growth but never receive payment from their customers. This may force a write-off in the future and depress future earnings.

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Cintas Corp Annual Data

 May07 May08 May09 May10 May11 May12 May13 May14 May15 May16 Accts Rec. 409 430 358 362 429 451 496 508 496 563

Cintas Corp Quarterly Data

 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 Accts Rec. 510 498 496 531 549 551 563 1,128 607 606
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